WEEK35 - Dry Cargo Market “Highlights” – 27-August-2010 until 03-September-2010

This week was a complete mirror image from last week. All red indices were green this week, and all green turned red. The larger Capes and Panamaxes showed some strong momentum and completed the 4 working day week 35 with a positive w2w comparison, while the smaller Supramaxes and Handymaxes made losses. As we mentioned this week was a shorter week,
having only 4 working days in the calendar as Monday the 30th August was a Bank Holiday in the UK and the Baltic Exchange had no indices nor fixtures published, however that did not stop the weekly data to contain strong dynamics and a good number of interesting fixtures that we will go through further in this report.

Still there are many ships chasing lesser/fewer cargoes and this imbalance of the market is self‐implicated and will sooner become far worse than better as we believe that owners been shooting at their own feet! We will be providing readers with a brief snapshot of the results of the Year to Year overcapacity reports we have produced with data from Aug 2009 and Aug 2010.

The shipping markets we repeat, have regained a great share of the heavy losses encountered during beginning of this summer and as we are entering into the first week of Fall, with temperatures in Athens falling and the holiday mood slowly dispersing the optimism increases as we feel that first two months of this summer period July and August losses have been practically covered by more than 60%. With China leading the recovery, we believe that we may well be posed for a positive September. However the underlying global market fundamentals still pose a great degree of an uncertainty level although overall the picture looks much better than
2 months ago.

However we are a bit skeptical as to the state and condition of the major developed countries economies that lack the dynamics and growth we all hope for. It seems that consumers in these markets are all in the “postponable expenses: mode… and the percentage of these PE’s in the USA is 16.8% of the US GDP. Adding to this we second the thoughts of Ethan Harris, head of
developed markets economics research at BofA Merrill Lynch Global Research in New York who said that the U.S. economy is so bad that the chance of avoiding a double dip back into recession may actually be pretty good. The sectors of the economy that traditionally drive it into recession are already so depressed it’s difficult to see them getting a lot worse. Inventories are near record lows in proportion to sales, residential construction is less than half the level of the housing boom and vehicle sales are more than 30 percent below five years ago.

News Corp Chief Executive Rupert Murdoch said the global economy is still in an uncertain state and the media industry is going through a fundamental transformation that is unpredictable. "I do not believe we are out of the turmoil yet. Sovereign debt pressures, soaring deficits and unacceptable U.S. unemployment levels are key obstacles to the global economic recovery," said
Murdoch in a letter to shareholders in his company's annual report. "Others may see more positive signs, but I believe until these issues are addressed, markets, governments, currencies and consumer behavior will be unpredictable," he said. "Companies that do not innovate will struggle to survive," wrote Murdoch. "They will be digitally disoriented, quickly losing touch with their customers, who will be more technologically literate than those who seek to provide them with services and products."
 

China as we have stated repeatedly these past 2‐3 weeks, has imposed their own game rules in the iron/ore pricing agreement, and the country’s size and import appetite on its own have such great weight that they can and have brought the per tone prices to the desired levels. China's National Development and Reform Commission (NDRC) said that China's investment plan of RMB 4
trillion ($588 million at current exchange rate) should be fully completed in the second half of this year. Since the RMB 4 trillion economic stimulus plan introduced at the end of 2008, following the global financial crisis, the investment growth maintained at a high level. However, with the gradual withdrawal of investments made by the central government, the growth in China's fixed
asset investments started to represent a falling trend. According to the data released by the National Bureau of Statistics, China's urban fixed asset investments, in the January‐July period of this year increased by 24.9 percent, as compared to the corresponding period of 2009. (Steel Orbis)

complete copy if our weekly report for WEEK35 can be downloaded from here:

Cotzias_2010_Week_35_Report_03_Sep_10.pdf